During this month of September 2023, we have read numerous articles on the IRS efforts to use more AI tools (in addition to hire more IRS agents).
Over this summer of 2023, we have seen an increase of IRS examinations and notice of deficiencies where either you agree to the change or if you disagree, then, you will have to appeal in the U.S. tax court.
As a result, from the original numbers of 87,000 new IRS agents in January 2023 that made the news, the number was already down to around 20,000 expected new agents (note that this number includes the replacement of around 12,000 agents that will retire in the next couple of years).
Last October, the real number provided by the IRS (official IRS post) is an increase of around 4,000 new agents mainly to assist with the phones (customer service representatives) for the 2023 tax season. Around ten days ago, the IRS posted on their website that they are looking to add another 3,700 agents for the further scrutiny on wealthy taxpayers, large partnerships (over $10m in assets) and other cases.
Based on this information and our professional experience, we expect the number of examinations (audits) to increase in the short and medium term.
Also, it seems that tax rates will increase in a couple of years. Note that some of the benefits from the Tax Cuts and Jobs Act (TCJA) of 2017 (Trump Tax Act) will expire in 2025 such as estate and gift tax exemption increase, reduction of the tax rates, almost doubled standard deduction (even if State and Local Taxes SALT was limited to $10k) and especially offset the tax cuts to corporate profits (which were translated as 199A qualified business tax deductions for pass through entities). With a current US debt of around 33 trillion dollars as of the date of this post, taxation might be an excellent tool to pay back that debt.
Link – The Conversation – Article – IRS is using $60B funding boost to ramp up use of technology to collect taxes − not just hiring more enforcement agents
Link – Journal of Accountancy – Article – IRS vows new enforcement efforts aided by AI
Link – Reuters – Article – The new IRS employees: An ‘army’ or harmless programmers?